Tuesday, May 31, 2011

Arsenal's Transfer Budget

The end to the football season could not have come quickly enough for Arsenal fans, as their team once again failed to maintain its challenge for honours, falling away to a disappointing fourth place after being Manchester United’s main challengers for so many months. Those of a more artistic persuasion might well have reflected on the words of TS Eliot, “This is the way the world ends, not with a bang but a whimper”, while baseball aficionados might have opted for Yogi Berra’s classic, “It's déjà vu all over again.”

Arsenal’s form declined so much that they only won once in their last seven Premier League games, though with typical contrariness that was against the champions, and lost three times to the might of Bolton Wanderers, Stoke City and Aston Villa. Six points in seven matches is unlikely to bring the long awaited silverware, in fact, it’s relegation form. Little wonder that Arsenal fans exhorted the club to spend some money during the away trip to Fulham, though their message was delivered with a great deal more earthiness.

It has become abundantly clear that Arsenal need to strengthen the side during this summer’s transfer window, adding some experience and steel to the young talents already there. Manager Arsène Wenger has confirmed that there are “resources available” and that he intends to be “very active” in the transfer market, but it is unclear exactly how much the club could afford to spend.

"Robin Van Persie - there is value in the market"

Fans would be little wiser from reading the newspapers, as they have provided a variety of figures. In the last month alone, the Mail on Sunday warned that Wenger would only have £30 million, but the Sunday Express spoke of a £50 million war chest. Falling neatly in the middle, the Daily Telegraph thought that £40 million sounded about right. The only thing that they had in common was a complete lack of explanation of how they had arrived at their figures. Of course, one of them could well be correct, but that’s almost certainly more by luck than judgment.

To be fair, the club has not exactly helped them with their assessments with Wenger saying that he did not know how much was available either, though he added, “The only thing I can say is that the club is in a healthy financial situation and, if needed, we can make a big transfer.”

Unfortunately, this sounds horribly like the noises coming out of the club last year, when chief executive Ivan Gazidis stated, “We have money available to invest in the transfer market when we can identify the right players to add into the mix that add something to the squad.” Even old school chairman Peter Hill-Wood was at it, “We have got more money than we’ve had for a long, long time and we would like to spend it. But we want to spend it sensibly. There is plenty of cash, although not in comparison to Manchester City.”

"Cesc Fabregas - will he stay or will he go?"

However, all this bravado didn’t add up to a tin of beans with the only arrivals being the inexperienced Laurent Koscielny, the disastrous Sebastien Squillaci and Marouane Chamakh (on a free transfer).

Clearly, Arsenal would be foolish to show their hand to other clubs by divulging the size of their transfer budget, but it might be instructive to some fans if we try to make a reasoned estimate of what they could spend, if only to manage expectations.

The first thing to say is that the club actually does have a formal war chest in the shape of the ring-fenced Transfer Proceeds Account (TPA). As a condition of the Emirates Stadium financing deal, the 2006 bond prospectus clearly states that 70% of net sale proceeds must be deposited into the TPA and only used for certain specified reasons including players. The idea is that this protects lenders by ensuring that the club continues to invest in its core asset, i.e. the playing squad, either by buying new players or extending existing contracts.

"Another bargain basement buy"

However, what most people do not appreciate is that this account can also be used for other purposes, such as purchasing other football assets or prepayment of debt, so it’s not absolutely guaranteed that these funds will be used on players. Therefore, it’s not a straightforward exercise to work out how much money remains in the TPA.

Many point to the money received from the £40 million sales of Emmanuel Adebayor and Kolo Toure to Manchester City in 2009, suggesting that this means that at least £28 million should be in the account, but there have been reasonably pricy purchases since then (Vermaelen £10 million, Koscielny £10 million and Squillaci £4 million) and, as we have seen, money could also have been legitimately spent on developing the stadium or academy. In other words, the TPA is no more than a useful indicator of the money available, though the highly respected Arsenal Supporters’ Trust (AST) have estimated a figure of £27 million here.

Perhaps the best starting point for an analysis of Arsenal’s transfer fund is the actual cash balance, which was £110 million in the last published accounts (as at 30 November 2010). The club is keen to emphasise the seasonal nature of cash flows, e.g. money taken from season ticket renewals at the beginning of summer will be used to pay expenses over the next few months, with Gazidis stating, “We are not sitting on a cash balance of over £100 million. We need operating money over the course of the year.”

That’s absolutely correct, but if we look at Arsenal’s cash balances over the last few years, it is clear that the trend has been upwards, rising from £53 million in November 2006 to £110 million in November 2010. Furthermore, the cash balance every May has been around £25 million higher than the previous November, so the current figure should be even higher than the most recent accounts.

In other words, Arsenal’s executive hierarchy might be accused of being a little conservative here, though they do have to maintain £23 million as debt service reserves for the stadium financing, which would mean a net balance of £87 million.

In fact, Arsenal’s ability to generate free cash flow has been very impressive, considering that: (1) most of the cash for the commercial deals with Nike and Emirates was paid upfront; (2) they have also managed to repay all the property debt incurred for the Highbury Square property development (just under £140 million).

Given all these factors, it is virtually impossible to work out how much cash is available without making a few assumptions, so that’s exactly what we are going to do. First, let’s assume that the club requires £42 million for expenses in the second half of the financial year (net of receipts), which is based on the £35 million estimate made a year ago by the good folk at the AST, who are closer to Arsenal’s accounts than anyone else, which I have increased by a prudent 20% primarily to reflect the cost of higher wages. That would leave us with net cash of £45 million.

"Jack Wilshere - a great argument for the youth policy"

We should also deduct transfer fees still owed to other clubs, which are listed in the accounts as £13 million, though Arsenal are also owed £1 million. Given that these other creditors cover both the amounts owed within a year and beyond, it’s safe to estimate a net payable of £10 million in the next 12 months. The club also has contingent liabilities of £14 million, where payments are made based on certain conditions being met, such as number of appearances for the first team or a player’s country, but these are considered less likely, so I have excluded them from our calculation.

So, deducting the £10 million for transfer fees still owed would reduce the net cash to £35 million. Maybe the gentlemen of the press do know something after all, as that is not too far away from the estimates I discovered earlier.

However, Arsenal still have an ace up the sleeve, which is the money they can expect to receive from property sales. Chairman Peter Hill-Wood has confirmed that the property business is now debt-free, so all future sales proceeds (less costs to complete) will boost the cash position. The club has not provided an estimate of how much this will be worth beyond stating, “The next few years will see the accumulation of a fairly significant cash windfall for the Group”, which is accounting speak for a lot of money.

"Arshavin - back to Russia with Love?"

There are two elements to this: (1) the remaining 35 apartments at Highbury Square (620 of 655 have already been sold); (2) other developments acquired as part of the stadium move, including the market housing at Queensland Road (with planning permission for 375 apartments), Hornsey Road and Holloway Road.

Again, we cannot be certain how much these are worth, but we can take an educated guess. Based on the price achieved in the first half of 2010 for Highbury Square (£22.5 million for 50 apartments), we would calculate £15.8 million. Using a similar calculation for 2009 (£96.6 million for 261 apartments), the sum received would be £13 million. An average of the two would imply around £14 million.

It’s even more difficult to place a value on the other developments, but I note that the social housing element of Queensland Road brought in £23 million last year.

In total, the accounts include development property at a cost of £28.2 million, but formally state that the directors consider the net realisable value to be “greater than their book value.” Using a 50% uplift, based on previous transactions, would suggest a value of £42 million, which is very close to the £45 million estimate made by the AST a year ago.

If we assume that the remaining Highbury Square apartments are sold reasonably quickly, we could add £14 million to the £35 million transfer fund we calculated earlier, giving a total of £49 million. Let’s be generous and call it £50 million. OK, there are a few assumptions behind this figure, but these are based on a degree of logic.

That does not include any money from the other property developments, which should be worth around another £30 million (£45 million total less £15 million assumed for Highbury Square). Although that is unlikely to be available for a while, it should under-pin any money laid out this summer.

Given this safety blanket, it is reasonable to ask why Arsenal are still so cautious in the transfer market. After all, everyone knows that they make huge profits, right? Last year, Arsenal reported a record profit before tax of £56 million, but this was no flash in the pan, as they also averaged £41 million in the previous two seasons.

Truly impressive, especially if you consider that only three other Premier League clubs made profits in 2009/10 and all of those were significantly lower than Arsenal: Wolverhampton Wanderers £9 million, WBA £0.5 million and Birmingham £0.1 million. However, while a strong balance sheet is laudable, that cannot be the club’s primary objective, as Hill-Wood admitted, “Our business goal is not to generate profits as such, but rather to grow the club’s revenues, so that they can be re-invested in the team and the long-term success of the club.”

Furthermore, if you look under the bonnet, there are some underlying issues that suggest that the financial picture is not quite so wonderful as it has been painted. In fact, if you exclude the £11 million property profit and the £38 million made from player sales, then the remaining football profit in 2009/10 would only be £7 million. That’s still very respectable, especially as it is net of £14 million interest payments, but the interims really bring the ongoing challenges to the fore.

For the first six months of 2010/11, the club actually made a loss of £6 million, largely because property profits fell to £3 million, while the profit on player sales sharply declined to £4 million, mainly from the sale of Eduardo to Shakhtar Donetsk. In fact, the pure football business produced a loss of £13 million.

To be fair, part of that is due to timing differences with two less home games than the previous season and TV merit payments, but it does suggest that the business model is not quite as robust as previously thought. There has been an undue reliance on player sales with an average £25 million a year being generated from this activity since 2006. Good business, but it makes it hard to build a winning team.

Like every other football club, Arsenal have also had to contend with explosive growth in the wage bill, which has risen from £83 million to £111 million in just four years. This “increased investment in football wages” has further increased the payroll by £4.5 million in the first six months of 2010/11, reflecting a deliberate policy of renegotiating contracts. As Wenger’s budget covers both transfers and wages, just because money is available to him does not necessarily mean that he will use it to purchase new players. Indeed, there is already talk of extending the contracts of Samir Nasri, Gael Clichy and Johan Djourou this summer.

Arsenal’s wage bill of £111 million is still substantially less than Chelsea (£173 million), Manchester City (£133 million) and Manchester United (£132 million), but it is also a lot higher than the chasing pack. In particular, it is a hefty £44 million more than Tottenham (£67 million), who finished just one place lower in the Premier League.

This sometimes comes as a surprise to many fans, given Arsenal’s well-publicised sustainable model, but is due to a couple of factors. They have a large squad and, while the wages at the top end might not be the highest, the fringe players like Denilson and Rosicky are handsomely awarded, as are the young players.

This is a policy that is worth reviewing, as a degree of complacency would appear to have set in at this level and some judicious pruning of the dead wood could free up wages for a couple of genuine world class talents. In addition, it would be worth introducing a higher element of performance-related pay to concentrate the collective mind on striving to win trophies.

Clearly, wages are a massively significant factor when it comes to signing new players, even though that great sage Jamie Redknapp has ludicrously asserted that “you can’t get cheaper than a free transfer.” For example, Marouane Chamakh cost the Gunners nothing when he arrived from Bordeaux, but a five-year deal on a reported £50,000 a week represents a £12.5 million commitment. That said, any increase in the wage bill from incoming players could be largely met by the reductions from departing players, so this argument cuts both ways.

There would also appear to be scope for some cost cutting elsewhere, as the annual costs of £55m for “other operating charges”, i.e. excluding salaries and amortisation, are on the high side. Unfortunately, the club does not provide much detail for these costs, but they must include items like stadium operating costs, travel and training. On its own, the absolute figure is fairly meaningless, but it accounts for 27% of Arsenal’s total costs, which is a higher proportion than any of the other leading Premier League clubs with the others ranging from 18-23%.

One area that has really restricted Arsenal’s ability to operate at the higher end of the transfer market is their woeful commercial income of £44 million, which lags way behind the rest of Europe’s elite. According to Deloitte’s Money League, Bayern Munich £142 million and Real Madrid £123 million generate three times as much revenue from such activity, while Manchester United have announced that they will break the £100 million barrier this year.

Arsenal’s weakness arises from the fact they had to tie themselves into long-term deals to provide security for the stadium financing, which arguably made sense at the time, but recent deals by other clubs have highlighted the lost opportunities. The Emirates deal was worth £90 million, covering 15 years of stadium naming rights (£42 million) running until 2020/21 and 8 years of shirt sponsorship (£48 million) until 2013/14. Similarly, the club signed a 7-year kit supplier deal with Nike for £55 million until 2011/12, but that has since been extended by 3 years until 2013/14.

So, following step-ups, the shirt sponsorship deal is reportedly worth £5.5 million a season, which compares highly unfavourably to the £20 million earned by Liverpool from Standard Chartered and Manchester United from Aon. It’s the same story with the kit deal, which now delivers £8 million a season, compared to the £25 million deal recently announced by Liverpool with Warrior Sports and the £25.4 million paid to Manchester United by Nike (yes, the same company that pays Arsenal much less).

It’s not overly dramatic to say that Arsenal leave over £30 million a season on the table, because of their poor commercial deals, which is the equivalent of one great player a season.

Arsenal’s new owner Stan Kroenke has said that he “intends to use his experience to help Arsenal continue to grow its global brand”, including persuading Wenger to take his side on a pre-season tour to Asia, but he might also consider whether it would be worth buying out these punitive commercial contracts, as Chelsea did a few years ago.

Arsenal have restructured their commercial team at great expense, recruiting Tom Fox from the NBA in August 2009, but to be perfectly candid they have not delivered much to date. In fact, commercial revenue actually fell £4 million in 2009/10. They might argue that their hands are tied with the long-term deals, but if that is the case, what was the point in hiring such costly executives? In any case, they should be able to work freely on secondary sponsor deals, which has been an important source of United’s impressive growth. When the interim results were announced, Gazidis said that fans would “begin to see some results over the next year” – let’s hope so.

Another factor that could impinge on Arsenal’s spending plans is the imminent arrival of UEFA’s Financial Fair Play regulations, which aim to force clubs to live within their means. Over the next two seasons, a club will only be allowed to make an aggregate loss of €45 million, but that assumes that the owner covers the loss, which has not been the modus operandi at Arsenal to date. Otherwise, the acceptable deviation is only €5 million.

In other words, if Arsenal opted to accept a few losses while they spent big on transfers, FFP might present them with some problems, even though they would be able to exclude costs incurred for the academy and stadium construction. Given the manager’s frequent criticisms of financial doping, such a move must be considered highly unlikely, but we are exploring all possibilities here.

Even Wenger mentioned that his policy might be about to change: “The market will be hyperactive because everyone believes financial fair play will happen soon. So we are quickly doing the last buying before the stores will be closed. And for the first time for a while, I will be very active too.” Although this is encouraging news to many fans, it is a little worrying to us financial types, as it implies that Wenger does not full appreciate that the resulting amortisation from buying new players will be included in UEFA’s break-even calculation – somewhat surprising, as he has a master’s degree in economics.

More positively, what could Arsenal do to enhance their spending power?

The most obvious tactic would be to sell some under-performing players and add that money to the transfer fund. Arsenal are well-versed in this art, being the only leading club to make money from buying and selling players in the era of foreign ownership (starting from the arrival of Roman Abramovich at Chelsea). Since 2003/04, Arsenal have net proceeds of £3 million, while Chelsea and Manchester City have spent almost £400 million. The “Redknapp factor” has helped Spurs spend £132 million in the same period, though his predecessors were no slouches in this department.

Most Arsenal fans would agree that there’s no shortage of candidates that could depart with minimal impact, though the most likely to go are Denilson and Nicklas Bendtner, who have both openly spoken of their desire to leave and could raise around £16 million. Others might also be given a nudge, like the inconsistent Diaby, the erratic Eboue, the dreadful Manuel Almunia and Tomas Rosicky, whose best days are sadly behind him.

One potential difficulty would be finding clubs willing to match their exorbitant salaries, but there are ways and means. Of course, these players would have to be replaced, though I reckon this could be done more cost effectively, especially if cheaper, hungrier youngsters like Henri Lansbury, Francis Coquelin and Benik Afobe return from their loan spells. That would also ensure that the club did not fall foul of the Premier League homegrown player rule.

"When will Silent Stan become Stan the Man?"

This would represent a fairly radical change in policy from Wenger, who has been quoted in the past as not wanting to introduce too many new players at the same time, but the performances in the last few weeks of the season were so dispiriting that he might just throw caution to the wind. That might also include the sale of one or more of the team’s stars, like Cesc Fabregas, Andrei Arshavin or Samir Nasri, which would release substantial funds for a major rebuild. Personally, I wouldn’t bet on this, but nor would I be hugely surprised if it did come to pass.

There is another aspect of how transfers work that is not always fully appreciated, namely many fees are not paid upfront, but in stages. In this way, a club might only have to lay out, say, £8 million immediately for a £24 million player with the other two slices being paid over the next two years. This is fairly standard practice on the continent, which was why Barcelona owed Arsenal so much money for so long for Henry and Hleb (though they don’t any more). That’s one way of “increasing” a club’s transfer fund, but this method should be used with discretion, otherwise you might just be storing up problems for the future.

On a similar theme, Arsenal could also take on more debt, as the balance sheet is very strong. Some supporters erroneously believe that the club is now debt-free, as they have paid off all the property development debt, but it is true that they have managed to reduce their gross debt to £263 million, which effectively represents the long-term “mortgage” on the Emirates stadium. Given that the gross debt has been reduced from the £411 million peak in 2008, there is clearly some room to manoeuvre here.

On the other hand, this would be a great opportunity for Stan Kroenke to make an immediate impact at the club by paying off this debt early in order to reduce the cost of servicing these loans (around £19 million a year including £5 million of capital repayment). The money saved could then be used to improve the squad. Frankly, given Kroenke’s praise for Arsenal’s self-sustaining model, this does not seem too likely, but other club owners have been known to go down this path.

Even though Kroenke is one of the wealthiest men on the planet, he gives every sign of being a careful investor, waiting for Arsenal to flourish under UEFA’s Financial Fair Play restrictions. His motto for the time being appears to be no major change, which would militate against the club embarking on a spending spree this summer. That said, he would like to be associated with a winning club, so there might be some encouragement for the manager to act more decisively when pursuing a new player.

In any case, we do know that Arsenal will benefit from some revenue growth , as they expect to generate £4.5 million from the deeply unpopular 6.5% increase in ticket prices for next season. Although part of this is down to the 2.5% VAT rise, the remaining inflationary increase is a bitter pill to swallow for fans that already pay the highest prices in world football.

In the business world, price increases are often considered the path of least resistance, and football club owners are proving increasingly happy to adopt the same approach, as their “customers” have the fiercest brand loyalty around. After all, an Arsenal fan is hardly likely to switch his allegiance to Spurs.

Arsenal’s fifth place in Deloitte’s Money League owes a great deal to their £94 million match day income, which is only surpassed by Real Madrid and Manchester United. In fact, 42% of Arsenal’s total revenue comes from match day, far higher than any other club, emphasising how reliant they are on their fans (including the “prawn sandwich brigade”), though it also serves to underline how feeble the commercial income is. Among the top 20 clubs in the Money League, only Aston Villa earn a lower proportion of their revenue from commercial activities.

In addition, the Premier League’s new TV deal, running from 2010 to 2013, is much higher than the previous contract following the significant increase in overseas rights. Hence, Arsenal’s distribution in 2010/11 has increased by £4.5 million to £56.3 million, even though they finished one place lower in the Premier League.

However, that also reinforces the importance of a team succeeding on the pitch from the financial perspective.

Not only has Arsenal’s deterioration in April and May devastated the club’s fans, but it has also hurt their bank balance. The immediate impact of dropping from second to fourth place means that their Premier League merit payment is £1.5 million lower, but the damage does not stop there, as it also has an effect on money from next season’s Champions League.

"No need to buy a new keeper after Szczesny's emergence"

The revenue distribution from UEFA comprises participation fees, prize money plus an allocation of the market (TV) pool, which is split 50% between progress in the Champions League and 50% based on the club’s finish in the previous season’s Premier League.

For England, assuming that four clubs reach the group stages, the latter element is divided as follows: 40% to club finishing first in Premier League, 30% for second, 20% for third and 10% for fourth. This year, that process resulted in the club finishing second in 2008/09 (Manchester United) receiving £10.6 million, while the club that finished fourth (Spurs) got £3.5 million – a difference of £7.1 million. This will be mitigated to some extent by the gate receipts from Arsenal’s qualifying match, but that brings other potential problems.

Speaking of the Champions League, Arsenal’s failure to win the group last season, due to pitiful defeats against Shakhtar Donetsk and Braga also cost them dear. First, each win in the group stage is worth €800,000, while a draw brings a club €400,000. Then, if Arsenal had won the group and avoided Barcelona, they might well have reached the quarter-finals, which would have been worth another €3.3 million prize money and €1.3 million from the market pool progress allocation. Let’s assume Arsenal had pulled their collective finger out, drawn the last two group games and reached the quarter-final. That would have been worth an additional €5.4 million (or £4.6 million).

This is all very theoretical, but the point remains valid: a little more effort on the pitch would have brought higher financial rewards, which might just have avoided the need to raise ticket prices. Go figure, Arsenal fans.

Of course, the doomsday scenario is that Arsenal don’t actually qualify for the Champions League group stages. They will be seeded, but could still draw an awkward opponent at an inconvenient stage of their preparation, so it’s far from guaranteed that they will get through – yet another drawback of finishing fourth. If they don’t make it, they will lose out on at least £25 million, not including additional gate receipts.

Arsenal’s bond prospectus confirmed that more revenue could be generated from commercial deals if the team does the business on the pitch: “AFC can earn additional bonus payments depending on the performance of the first team.” Apart from such uplifts in existing deals, it is evident that sponsors like to be associated with winners, so this should also be a consideration when it comes to deciding how much to spend on buying new players. That ignores the increase in shirt sales and other merchandising that normally results from a club having a world-class player or two on its books.

Given the revenue shortfalls from a relative lack of success, another way of looking at Arsenal’s transfer policy is to ask whether the club can afford not to spend, especially as others seem happy to buy their way to success. The traditional “Sky Four” has been gate-crashed by the extremely wealthy Manchester City and the big-spending Tottenham, so Arsenal can no longer take for granted that they will secure the lucrative Champions League qualification every season. Besides, on the form of the last few weeks, I’m not sure that Arsenal could approach any match with a great deal of confidence.

"Nik Bendtner - must be worth £10m of someone's money"

However, there is no doubt that this Arsenal team does have potential, as evidenced by rousing victories over Barcelona, Chelsea and Manchester United, so it’s not entirely unreasonable when Wenger said that it would be “completely stupid” to make significant changes to the squad this summer. He has argued that he does not want to “kill” his young players’ development, “If I go out and buy players, then Jack Wilshere does not come through”, which may be true, but there are other players in the Arsenal team that do not possess the same ability, nor demonstrate the young Englishman’s desire on the pitch.

There do seem to be some mixed messages coming out of North London these days. On the one hand, Wenger attributes his unwillingness to spend to a profoundly held belief in his policy, “You cannot come to a conclusion that this team needs a massive change. We are there, but because we have not won trophies, people destroy us completely.” However, this sounds terribly similar to his words last summer, when he argued, “I feel we have made huge steps forward this year compared to last year.”

On the other hand, he sometimes implies that his hands are tied financially, “Even if people say you have to spend money, we have to be realistic. We can’t buy players for £50 million. That is a fact.” However, there are several arguments against this perspective: (a) few sensible supporters want Arsenal to spend that much on one player; (b) very good players can be bought for much smaller sums, e.g. Mesut Ozil, Nuri Sahin and Rafael Van der Vaart; (c) as we have seen, money is available to improve the squad, probably around £50 million.

"Thomas Vermaelen - like a new signing"

Indeed, Wenger himself seemed to suggest that was the case, saying that the club has the resources to secure the services of a top talent. While his priority might be to keep his star players, he has also admitted that he wants to strengthen, though this does not necessarily imply lots of comings and goings, “It’s not the number, it’s the quality.” That might not be such a bad outcome for Arsenal fans. If the club does manage to buy 3-4 proven, world class players with the requisite winning mentality, that could make an enormous difference to such a young team.

For many years Wenger was effectively fighting with one arm tied behind his back, due to the financial constraints imposed by building the new stadium, but the club now has sufficient funds available to spend again, albeit not at stratospheric levels, without compromising its sustainable model. They need to do something, because one thing is certain: if you keep doing the same thing, you’ll keep getting the same results.

Once again, not a news grabbing headline but thoughtful and clear. Worth a read by all Arsenal fans on the web and blog sphere. Take home messages : Arsenal are not free of debit; Arsenal need to cut out the dead wood; Arsene has his hands tied behind his back; we dont have any sugar daddy whos going to wave a magic wand; monies from the commerical side is laughable, and not likely to change.

Great article as always, one minor point. Its worth pointing out that it would be very expensive for Kroenke to pay off the stadium debt right now. This is because the bonds were issued as fixed rate securities with a "make whole" (or spens) provision. This guarantees the investors that the cash payments they earn on the bonds including the fixed interest rate (5.1418%) is kept constant in the event of early repayment. Considering today's low rates, Kroenke would have to pay the bondholders a significant premium to face value in order to retire the bonds.

This is a fantastic piece, well researched and should be required reading for all Arsenal fans.

It would take away some of the nonsense and hyperbole spouted as financial 'fact' by some disaffected blog sites and fans, but actually displays a complete ignorance of the actual financial position of the club, even with some of the assumptions stated above.

Good read. I've often thought the financial situation at Arsenal in the last few years was coloured by the property arm, whilst the footballing business has been weak. Which runs contrary to the generally accepted wisdom.

Finishing fourth this season could be a major problem for the club, not just in terms of UCL monies but also to the brand of the club. Who would want their name associated with a team that can't be counted on to do the job when needed?

Everyone wants a winner, and the sponsorship money won't come in if the sponsors don't have confidence in Arsenal winning.

A few points worth making I think.Money from such as Emirates and Nike was lower than might have been (now) expected because it was, as you state, upfront. If it hadn't have been so Arsenal would have had to borrow more for the building of the stadium and would probably had to pay a higher interest rates into the bargain. Short term gain thus reduces long term pain and that fits in very well with the principle of custodianship which the AST and AFC hold so dear.Secondly there is no doubt that Arsenal are setting great store by the successful implementation of FFP. They probably lobbied for it longer and more strongly than any other club and are seen by UEFA as the template for how clubs need to be run in the future. They can hardly break ranks and tear up that template (which btw existed long before Wenger arrived) just at the point of delivery.Thirdly, while FFP will take a bit of time to work its way through the system and have its full effect we are already seeing the transfer market change. January's deals were almost all funded by 'doping' money. If that money is largely removed, transfer values will plummet. The shop isn't going to close but, in future, it will look much more like a fire sale than it does now. Again Arsenal, knowing that this was the consequence of FFP, have kept their powder dry and have dealt only at the reasonable and rational level - i.e. the level that is not financed by speculative debt. Buying players has always been a risk which often doesn't pay off so it's best done sparingly and at as low a level as possible. Spurs have actually taken the opposite view (as your figures show) and, historically, the return on their investment has been miserly by comparison to Arsenals.Conversely it may well be the last chance to make really big money by selling a couple of top players and I wouldn't be entirely surprised if, once again, Arsenal make a lot more than they spend this summer.I firmly believe that the most likely outcome of FFP is a return to the pre-Abramovich situation which saw Arsenal frequent trophy winners.

The tragedy of this season is not that we have finished another trophyless year,but the fact that our cockup after january is no more a theory,but an inevitable phenomenon.Next season these players will start knowing that all the points they gain upto jan will be undone by the post jan cock up.Strictly speaking we were having these cockups for like 3-4 years consistently.We blamed it on one thing or the other.Gallas,Eduardo and countless injuries were just scape goats in our own attempts to explain our post jan cockups.With a resurgent Liverpool,Man city and spurs,next season with these players will be a disaster.Our only hope is to bring in a new core of players.Heavy weights if possible.If its not possible,then horde of lightweight inferior players may even be better.Atleast they will start the season with hope.From all the estimates here,i dont think the budget would be enough.One benzema or anyone of some name easily commands 30 mil pounds now if they are not from arsenal.So our whole budget may easily be just enough for one decent player.the sad truth is that we cannot afford more,considering champions league is far from certain in the next seasons.

This puts the questions to the owner Kronke.Will he invest to lift this team up?I dont think so.He is a shrewd investor.he saw the self sustaining model of Arsenal,the inactive fans and a frugal manager.He has no personal interest in Arsenal except the financial part.He would be happy if Arsenal wins and he could pocket some dividents,or he could use plan B-avg performances and then sell on at a profit.eitherway he is gonna gain.He is not going to put a penny into our club,He wil have learned from Hicks and co.

The other course in our history would have been an Usmanov takeover.Think it would have been much better than a kronke takeover.Atleast his ego must have ensured that we have a higher transfer budget than chelsea.

Top blog. A couple of shrewd PL experienced players would do wonders I feel. Someone like Parker, Samba/Cahill and a few more additions would strengthen the team considerably. We also have more young players coming through who can provide competition for places (Lansbury, Coquelin, Bartley).

I don't think the outlay has to be massive, some players will move on (Almunia,Denilson, Rosicky, Clichy,Squillachi, Bendtner) who should generate some cash and free up wages.

@wengerball - disagree that sponsorship income is purely related to success. Spurs do far better on that front than we do. We simply undersold ourselves in a big way with the front loaded Nike and Emirates deals. The disappointing thing is Gazidis has proven unable to buy us out of those deals even though that was one of his priority objectives when he was appointed.

agree that Usmanov would have been a lesser evil than Kroenke. With Kroenke you know his primary objective is to take cash out of the club. Usmanov doesn't need a football club to earn a few extra quid, and as an earlier poster said ego would come into it with him. There would have been funds available under Usmanov.

Level-headed, clear-mind read, as ever. I am glad you put your finger on the need to make performance-related pay a bigger share of the players' earnings, especially the younger ones. I understand the need to secure a stable long-term core for a predominantly home-raised squad that was unlikely to be augmented by many big-name signings during the stadium move phase, but the approach taken does seem to have left some of the fringe players without much incentive to secure a regular first team place or to win consistently once they have.

There is also too much popular attention paid to transfer spending as a measure of a team. As you point out, wages are a significant part of the cost of a team and even transfer fees are a function of the length of time left of a player's contract. It would be interesting to see the "value" of the top clubs if their squads were marked to market. Has anyone ever done such an exercise?

Agree on the Usmanov is better than kronke thing.kronke comes from the same stable as the Glazers and Hicks.They are money mongers.There is no mortgage on the club does not mean he will not draw profits from the club or sell off club assets.Its evident he has no interest in football,may not have even heard about arsenal before he bought our shares.His only interest is our money.Usmanov has lots of money.he wants to be another Abromovich.I d prefer the next Abromovich to the next Hicks anytime of the day though I absolutely hate both of the situations.

One thing i am dissappointed is how arsenal bloggers have dealt with the issue.usmanov's naive attempts to silence his critics has led people to hate him and in the process kronke became portrayed as a saviour.infact it was a death warrant for our club.Even arseblog(whose views i always thought served the club the best) was so blind with usmanov hate that he missed our death penalty with kronke.

"On the other hand, this would be a great opportunity for Stan Kroenke to make an immediate impact at the club by paying off this debt early in order to reduce the cost of servicing these loans..."

Highly unlikely, since Kroenke has borrowed from the banks to purchase Fiszman's and Lady B-S's shares, he hasn't put his own cash on the table (the deal was handled by a well-known German Investment Bank). The difference between Kroenke and Glazer is that Silent Stan hasn't secured his loan against the assets of the club but against the assets of his other businesses, but of course, there's nothing to stop him using the revenues generated by Arsenal to service the debt, should he choose to do so.

Excellent research and conveyed in such a clear manner – a brilliant read. Thank you.

Just a quick note to one of the anonymous posters; although one world class signing may cost circa £25-30 million, as mentioned in the article, it is probable that any fee would be repayable over three seasons. Thus, if we invested in two world class signings, it is arguable that with our main talent staying, we could get over the finishing line at the first attempt, or put another way, with just one third of the transfer fees paid out. Now, that would be an investment worth making, but any signings would also have to be the real deal. Would any of these make that difference: - Eto? Falcoa? Benzema? Hazard?

Wenger doesnt spend because there is no money>he has always been covering the board's ass.When the stadium was being built wenger and the board said there is money.Now the board has concede there was no money then.Nobody knows what the board tells wenger.for them money is available may mean 10-15 mil pounds.

Unfortunately the slow realisation that Kroenke is the worst thing that has ever happened to Arsenal is too little too late. We've been Glazered.

Although the author's piece is well written and well researched it misses the point. The answer to the question how much money there is available now, or how much will be available in future is simple. There will always be less available than there should be for a club of this size, because a big slice will be going into Silent Stan's coffers.

detail explanation, very great to youif arsenal want to spend some money to cover the important position missed, like cb or cf,. i think there will be a great change to our team to compete in EPL and champion leaguedon't need big spend, some gunners still want to see the development of some potential youngster we had,. so just to make our team become have more quality

I follow the analysis for the most part. What I'm confused about is the negative adjustment of 42MM from expenses (net of receipts). I've a hard time thinking that cash outflows outweigh inflows for the latter 6 months to thee tune of 42MM. More simplistically, my analysis would likely start with an average net working capital (let's call it 75MM, which is in between the balance at 5/31/10 and 11/30/10) and back out the restricted cash of 23MM to get you to around that 50MM figure. Obviously when you purchase players, you must pay them salaries. However, this offseason I think/hope we will see a heap of player departures/sales which will help keep the wage bill in check vis-a-vis this year's wage tab. But in short, I do feel that 40-50MM, before considering any sales proceeds, seems as good a guess as any. Hopefully the sales proceeds from guys like Denilson and Bendtner will help facilitate the purchase of 1-2 players, thus leaving the big 40-50MM pile to bring in 2-3 world class signings (preferably at striker and CB). We shall see.

Quick query – this analysis seems to be based upon the assumption that a player transfer is a one-time cash transaction.

However, my understanding is that a transfer fee is, more often than not, a more complex arrangement, containing multiple clauses, and usually spread over a number of years. Monies due / outstanding from transfers will sit as short-term assets and liabilities on the balance sheet (and sometimes longer term), but not immediately affect a club’s cash position.

Whilst a club’s cashflow has to be respected, both short and long-term, I feel it’s simplistic to paint a transfer budget as a pile of cash with a fixed value. It’s a broader investment decision than that has ramifications on both the cash position, and profitability of the club. Of course, whether it’s today or tomorrow, a transfer fee is cash that will have to be paid out at some point in time, but there are ways to structure a deal such that £45m of cash in hand now can buy you more than £45m worth of players in one window, so long as you feel that the future cashflows can be covered by the club.

Yes, good point re paying off the stadium debt. I would also consider that unlikely, especially given Gazidis' past pronouncements on this issue. That said, it does cost Arsenal nearly £20m a season. Although this is nowhere near as high as Manchester United's interest payments, it is still burdensome.

This is all about the seasonality of cash flows, the most obvious example being that money from season ticket renewals is received upfront, while most expenses are paid monthly. This is also true to a lesser extent for TV income.

Arsenal's cash flow is further complicated by a couple of other important factors: (a) most of the money from the Emirates and Nike deals was paid upfront, so the revenue figures do not fully convert into cash; (b) cash received from property sales, which is largely a function of the number of apartments sold.

The latter point is why it's dangerous to use average net working capital figures from prior years, which is why I opted for my approach. As I stated in the article, the calculation does use a few assumptions, but I don't think that they are unreasonable.

The initial calculation produces a figure for money that is available to spend without specifying how that money would be spent. That analysis did actually refer to the debtors and creditors on the latest balance sheet.

Furthermore, later on in the article, when I look at how that transfer fund could be enhanced, I did mention stage payments as one such method, explaining how transfers work.

re: buying new talent...I would say that Arsenal doesn't really need any extra world class players, rather three or four experienced premier league players like Samba, to add some muscle to the team. The talent is there, the team just needs some rigidity, both mentally and physically.

As a last note, I'd be interested to see the the financial impact of Arsenal's troubled history of injuries these last few seasons. I have the feeling that our top talents are injured for longer that those of our rivals. Any truth to that? And can the club be blamed for that? What is the quality of our physio team, and would it be a worthwhile investment to improve the medical team/facilities?

Fantastic blog mate. You've really put the effort in and then some! I haven't read anything this detailed about Arsenal in a blog.......ever!

RE The Emirates/Nike deals - Inflation's a bitch. Unfortunately had it been 2 seasons later & so forth, we would've made a better buck regardless of our performances. That's the way the market cookie crumbles. I almost agree on possibly ushering Kroenke to buy out these deals and look for more profitable deals. The insurance and banking market is getting bigger in shirt sponsorship deals, moreso than eastern airliners.

RE: Comments of Usmanov vs. Kroenke. I have to disagree with those on the Usmanov side. Just because he's an oil baron type tycoon in Russia does not automatically put him in the same category as Abramovich when it comes to club investment. He's stated every year that there's an added amount of cash to the transfer warchest, though this has never been the case when it's come to signings. Also, say if he were in Kroenke's place and vice versa and he were to order the signing of some world elites, do you honestly think this is a viable option for the financial success of the club. Look at Real Madrid this year; spectacular goal numbers and a stellar squad but their only win has been the Copa del Rey. The financial windfall is obviously lesser than winning La Liga and the CL.

As pointed out in the above blog, for most clubs and you could say that Arsenal can be included in this. To succeed financially we need to succeed on the pitch - win our games and find the best league/cup position to reap the financial benefits. But, you also need tobe financially prudent so as to succeed on the pitch. Investing x amount on players while on reaching a certain position and earning y amount of money does not make sense. It's economically not viable and unfortunately football is controlled more by economics than the actual passion of using jumpers for goal posts on a Sunday morning.

Anyway, amazing blog and a big hands up for the research and the passion put into this.

I guess one of the big mistakes was to finance the new stadium with fixed interest rates. I am not saying that the global financial meltdown should have been foreseen by the board, but surely the yieldcurves back in 2005-6 suggested (at least partly)alternative methods of finance could be warranted. Of course the choice was made as that of "a conservative banker" which may have some appeal but clearly with the benefit of hindsight it was wrong! The same goes with the up front deals with Nike and Emirates were. In my mind the deals revealed panic in the boardroom. Football is clearly asunrising industry with only one trend in commercial income: UP and RISING. Dont make long sellings in such a market.

When it comes to ownership the ideal solution is simple to me: AST should have had the support from fans all over the world to buy Arsenal. That didn´t happen but in the short to medium run one can hope that AST will reach above 5 per cent. Usmanov is still an Oligarch whose wealth stems from the looting of assets belonging to the russian people (like Abramowich´s wealth) and though having been a supporter for 40 years I would have serious problems supporting a club owned by him. Kroenke is certainly also a long way from an ideal owner but he is more a business man than a very, very flawed person. Moreover if he reminds us of the Glazers maybe its not the worst that could hit us when we look at the results on the picth in the 2010/11 season.

Great article as always. I think there's a mistake in failing to compare the size of business when talking about wage bills. The wage bills in the accounts are usually shown for all employees not just playing staff. For example while Spurs seem to show a much lower wage bill they also have 122 fewer employees than we do because we're a much larger business. The fact is Arsenal employees generate about £125,000 per year more football revenue per head than Spurs employees while costing £38,000 per head per year more. It's not so cut and dried that it's Arsenal's wage bill that needs pruning.

For the Wenger Out brigade - the man has kept Arsenal alive since we moved to the Emirates. No other manager could have done what he did with the finances he had available. As he tends to say - look around at most clubs that have had to build new stadiums to realise most have dropped down several divisions.

For the Usmanov lovers, that would have spelt the end of a stable Arsenal. Does anyone enjoy the constant change happening at Chelsea just because the owner feels like it? No one can spend money indefinitely. At some point he will tire and then we'll have an aged squad like Chelsea with a change of manager every year.

Thanks for the great blog. It’s always a pleasure to see such a thoughtful piece written about our club.

As far as this summer’s budget is concerned I think it’s worth considering that while we may have a budget of up to, say, £40+ million, this budget could potentially have to last a number of years. As shown in the article, between 2006 and 2010 our net football profit (excluding player sales) was only £15.3m, i.e. £3.06m per year). Our commercial deals with Nike and Emirates were signed for good reasons at the time and maybe once they end we will get a better idea of whether it was the right decision or not but it looks like we are not going to be able to increase them until after 2013/14. Outside of this we currently have two additional means of income: The property deals still to be concluded (but how long these will take to conclude and how much we will get from it are still uncertain) and player sales.

What this means – to my mind at least – is that if we spend all of our current available cash in this transfer window then we will be left with typically just over £3m (maybe slightly higher as this figure is dragged down by 2006 and 2007 figures) plus player sales for investment in transfers and wages. This could be supplemented by tours to the Far East, etc, but seems unlikely to be a respectable figure for a side potentially trying to fight for the title unless the FFP rules have an even bigger impact than currently expected.

To me this suggests that if we spend too heavily this summer it could very much be a case of taking a huge gamble on this summer’s transfers being 100% right and our squad ready to take on the world. I would love to have such a ready team but there is always an element of unpredictability and I can’t see such a course of action being in line with our much respected and desired model of longevity and self-sustainability.

Delving into the realms of speculation, I can see us spending, say, £24m - £32m this summer (3 or 4 players averaging around £8m each) but being subsidized by player sales generating maybe £20m+ (NB52 + D15 rumored to produce up to £18m alone). This would allow us to retain a healthy cash flow for the coming couple of seasons and, in my opinion at least, allow us to reinvigorate the squad in the way required.

Spending money is positively correlated to final premier league table position, I'm fairly certain, and it's not disputed anywhere as far as I know. But has anyone run the numbers to see how tightly it is correlated? Specifically, at the top end of the table?

Starting from the first premise--spend more = higher place--we'd like to know where that money should be spent. Let's look at the possibilities.

First, transfer fees. Not likely to be as closely correlated to table position as wage bill, i.e., the money actually based (ideally) on on-pitch performance. Thankfully so, because Arsenal can't compete with oil money in this respect.

Second, Player wages. Arsenal is up there in terms of player wages, top 3 behind Man. U. and Chelsea (maybe vice versa?), if memory serves. (David Conn did a piece on the finances of every EPL team in the Guardian a couple of weeks ago.) This seems to be it, but then we remember that players on loan have wages paid by their owning club--so Chelsea paid most of Bellamy's ~90k/wk salary while he toiled for Cardiff City this season. That spending can't have much if any effect on Chelsea's league results.

Third, squad wages. Let's look only at the 25-man squad. These are the players that a manager counts on to get results. But some of these players obviously don't play--unless you are Arsenal, in which case the third-choice goalkeeper is an integral member of the team! Maybe wages spent on the First XI or weighted average match-day squad would give a closer correlation, maybe not. We wouldn't be taking into account suspected positive effects such as competition for places.

If those figures can be tabulated, I wonder how Arsenal stacks up? Obvious explanations for any deviations between the computed wage tables and the actual final tables could possibly be explained by to other important factors--a club's negotiating acumen, scouting, and (critical to any evaluation of Arsene Wenger) the managerial component of team performance.

You praise Arsenal that they make the most profits and only 3 other teams have made profits(small ones though compared to us) but if Man Utd did not pay their owner's debts, they would have been light years in front of us,right? Do you know exactly how much profit they would make per year ? Let's say last year

Absolutely brilliant insight..superb read and everyone should make a point of reading a very succint summary of where we are right now as a club and as a team with hopefully a bright future.Well done SR

@JasonRead Soccernomics, which addresses your question of what correlates best with table position, transfer fees or salaries. Answer is salaries hands down.@Swiss RamblerThank you for the article. Very timely as we are embarking on a historic season I think.

Yes, Manchester United are highly profitable before the interest payments and other exceptional items linked to their large debt. For a detailed analysis of the impact, you could look at an article I wrote after their last annual accounts were published:

Hi,when does the FFP accounting 'effective' period start?is there any way of extrapolating the effects on the top 4/5.i.e. if income increase on the same curve and outgoing continued on the same curve, then what could manure afford to spend on transfers in 2/3/4 years time.

Can't believe it that some people would rather have Usmanov instead of Kroenke. Based purely on their backgrounds and how they acquired their wealth, I would not want to be anywhere near Usmanov. Kroenke has not shown his hand yet but he hasn't committed any faux pas, yet, either.

lovely article. Though hard to follow at times but really gives an insight into arsenal's business side. I was rather shocked when arsenal made 56 million net profit the other year but you really cleared the doubt there as it was mainly the highbury sales :)

but what i would like to point out is that all the money in the world would not help arsenal if arsene decides not to spend or spends it on some unknown french player from ligue 1. the kitty should be about 50 million as i remember peter hill wood saying that arsene had 40 million in tranfer money the previous year. even though arsene only spent about 15-20 million of that. Even though peter hill wood's statement cant be taken at face value it is fair to say that arsene spent less than the allotted sum of the money he got.

Maybe buying into proven quality would be a good choice rather than buying some young 20 year old starlet with enormous potential. Arsenal at this point should be not looking at potential but theire "been there done that" quality. a mixture between proven and experience would be great but more towards experienced and less towards youngsters like Eden Hazard. players who might take a while to get accustomed to the pace of the Prem and then tire out towards the end hint hint chamakh.

I'm Ri of Change Rules football.com and I'm new to this blog (I got the link from The Guardian) and I must say there's a lot of data here needed to be read by the football people. I hope I haven't missed much.

I actually don't understand Nasri's statements. He's been good for only half a season and he thinks he's good enough to play with Arsenal FC. He is potentially world-class but surely not now.He needs to reonsider his thought and try to progress in the footballing department which can best be done at Arsenal.http://delhigunners.blogspot.com/2011/06/what-to-do-about-samir-nasri.html

Thanks Swiss Rambler for another great post. Maybe it has been asked before but if possible could you do a feature on the finances of Fifa and Uefa? I think a lot of football fans would be interested. Only if your personal safety is not compromised of course ;)RgdsJohn

Usmanov also claimed there would need to be a switch in emphasis if he were to end up on the board. He told the News of the World: "If the role of a board member is to oversee a trophyless period, while making significant personal profits and asking fans to pay inflation-busting ticket price increases then, no, I would not want to be on the board.

Excellent point regarding the poor performance of Arsenal's commercial deals in comparison to their rivals. Usmanov decided to rant in the News of the World that the board's failure to invest in a higher calibre of playing staff and the resulting depleted trophy cabinet will undermine the club's position when re-negotiating its current and any future deals. However, I'm inclined to disagree with him, partly because the kit deal achieved by Liverpool follows a similarly barren run of trophies and Arsenal remain a prominent brand around the globe. Moreover, the upcoming Asian tour marks a break from the Austrian training camp tradition and hopefully this will boost the clubs brand in Asia. Henry and FSG are making serious rain at Liverpool, partly through the relationships they have cultivated at the Red Sox, and we can only hope that Kroenke can utilize his portfolio of US sports franchises to help bring in increased commercial deals in the future.

I also think you make a very interesting point in refuting Jamie Redknapp's quip about free transfers and you're right to question the long-term deals that are offered to the incalculable number of "prospects" coming through the Arsenal ranks. Whilst I understand that Wenger may feel a young player may develop at a more advanced rate with the security of a long-term contract, I feel to see how the length of the contracts is in the best interest of the club financially. For instance, investing in a policy of youth development comes with the invariable consequence that some players will fail to make the grade. Why does the club need to offer all of their younger players 5 and 6 year deals when this very real possibly of unactualized potential lurks in the background? Surely it would make more sense to have shorter length contracts that are incentivized so that players earn extensions to their deals? Would love to know your thoughts on this.

ONLY IF WENGER SPENDS ON BUYING TOP QUALITY PLAYERS, THE TEAM WILL GET A MESSAGE THIS YEAR HAS TO BE A TROPHY YEAR. AND ONLY THEN WILL THE TEAM PLAY TO WIN. ELSE, IT WILL BE THE SAME STORY. SO, WENGER....BUY. AND, BUY NOW!

well researched...what do you think of Usmanov's criticism of the arsenal board?...i tend to concur, because much as many fans are blaming wenger, i think the manager is only executing the boards masterplan...the blame rests squarely with the board...CAN THE REAL STAN STAND UP....WE WANT OUR CLUB BACK TO WINNING WAYS!IT HURTS TO LOOSE ALL THE TIME..KEEP THE ARTICLES COMING..AM ADDICTED...ARITA,NAIROBI-KENYA..

Well written and well stated. I would add that all cannot be laid at the feet of the financial situation.

Arsenal were leading the league in 2007-2008 with a good team that had an excellent mixture of young and experienced players. In the winter transfer window, everyone knew that Arsenal needed an experienced midfield to provide some relief primarily to Flamini or Fabregas for the latter part of the season. It wasn't even necessary to go out and buy one, even one on loan or on a free would have been sufficient. But he stubbornly chose not to do it. And they went from a 5 point lead in March to 3rd place at the end.

A similar story last year where he refused to pay an extra £1.5 million for Schwarzer weeks before announcing a £56 million profit nor Samba or another experienced defender for £10 million or less again when it was obvious to everyone that they needed a defender.

I'm really at the end of my rope because I find that Wenger is more concerned on making a profit rather than winning titles or the commercial or professional benefits that accrue to the team from winning titles commercial potential of the club. That's why Wenger would go off to Austria every year instead of doing a tour with the team in either Asia or America. The window of opportunity is gone. They are very late to the idea of exploiting the commercial possibilities in Asia and America. They would have been considered the star team in the UK if they had won one or two titles to combine with their playing style over the last couple of years and we would not be talking about Fabregas and Nasri wanting to leave now. It's shamefull that in Wenger's mind, the market dictates that Koscielny is worth £12 million but not Samba. He places premiums on players that he sells but won't buy players he needs from other teams when they do the same or at least only in France. I will not be at the Emirates nor will I be watching games live this year. I will only catch them on MOTD as it is blatantly obvious they will not do anything this year. The only hope is that they purchase a tall experience defender who can lead will they have any hope of challenging. With the present cast there is no hope. Once again Wenger will compromise the team for probably a difference of £1 or £2 million difference in his valuation of Samba or Cahill but they will once again show record profits at the end of the year. Bravo Arsenal!

@ Anon 6th August 2011, you sully SR's blog with your diatribe on Wenger. Spout your sub-xenophobic drivel on more appropriate 'Arsenal' blogs. Jesus, Maria, y Jose. With 'supporters' like you, no wonder we're the laughing stock of the league and the whipping boys of the English phone hacker, sorry, Press.

After last night's thrashing, I had to come here and re-read this post to see if I could make any sense of the lack of incoming transfers. Even after the loss of Narsi and Cesc, why is he not spending?

Hi SwissRambler,Really insightful article as ever. Just one, potentially naive question: do Arsenal need to keep more money in reserve as they have to pay dividends, unlike other 'big' Premier League clubs that are not PLCs?

Praise for The Swiss Ramble

"Blogger of the Year 2013 - It’s testament to the effect that Kieron has had on the blogosphere that so many fans take his word as gospel. Putting to use his career in the world of finance, his insights into balance sheets and simple explanations of complex ideas appeal to the hardcore financial whizz and casual fan alike." - The Football Supporters' Federation